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Set fair
The UK’s leading self-storage company Big Yellow Group (LSE: BYG) issued a trading update this morning ahead of its AGM. This showed the company has made solid progress in the three months since its 31 March financial year-end.
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Average net rent per square foot was little changed on the same period last year but with the company driving up occupancy levels to 82% from 78%, like-for-like revenue and total revenue both increased by 5%.
Management sees scope to increase occupancy beyond its current target of 85% and with new space also coming on tap in 2018, the company looks set fair to deliver continuing earnings and dividend growth.
30-fold dividend increase
City analysts are forecasting a 9.4% increase in the dividend to 30.2p from last year’s 27.6p. This gives a prospective 3.85% yield at a current share price of 785p.
The dividend will have more than tripled from the 9.5p paid ahead of the financial crisis and increased more than 30-fold since the 1p maiden payout in 2003. This is an impressive record but it should be noted that it was punctuated by a suspension in 2009.
As a Real Estate Investment Trust, regulatory requirements determine the level of the Property Income Dividend (PID) payable by the group. No PID was payable in 2009 and management also elected to suspend the discretionary component of the total dividend. This was in order to take advantage of the adverse conditions in the property market and consolidate the company’s market-leading brand position.
While 2009 was a barren dividend year, the wisdom of the board’s decision has been borne out by the strength of the returns to shareholders since.
Predictable and sustainable payouts
The total dividend return of HICL Infrastructure (LSE: HICL) hasn’t been as large as Big Yellow’s, having increased from a maiden 6.1p after its 2006 flotation to 7.65p for its financial year ended 31 March. However, HICL has lifted its payout each and every year — that’s to say, including through the financial crisis — and having such a steady payer in a portfolio is advantageous in this respect.
The company’s reliability stems from its business as a long-term equity investor in infrastructure projects (primarily in the UK but also in Europe, North America and Australia). Its portfolio of over 100 investments has a weighted average concession life of 32.1 years and the company’s “principal objective” is “to deliver predictable and sustainable dividends” underpinned by its stable, inflation-correlated cash flows.
HICL is targeting a payout of 7.85p for its current financial year, followed by 8.05p next year. This gives a prospective yield of 4.91%, rising to 5.03% at a current share price of 160p.
